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This Great Graphic is a monthly
chart of the euro from Bloomberg, with a 120- month (ten-year)
moving average. It comes in now just below
$1.32.
In their pure form currencies do not have an income stream,
making valuation more elusive. Economists have derived many
equilibrium models around which currencies ought to gravitate
around in the long-run.
Currencies also gravitate around a long-term moving average by
definition. The OECD calculates purchasing power parity for
the euro at $1.24. Since the second half of 2002, the
euro has traded below the OECD estimate of PPP on two separate
occasions, in Q2 10 as the Greek crisis unfolded and again in H1
2012 as pressure built on Spain and Italy.

The euro is now just shy of 7% above the OECD PPP and less than
1% from its 10-year moving average. In the era of floating
exchange rates these are minor deviations. In fact,
by the OECD's measures, the euro is the least over-valued of the
G10 currencies.
Many are seeing Juncker's recent comments at yet another shot in
the currency wars. His appears to be a fairly isolated
voice in Europe. Recently, Martin Feldstein, no strong
advocate of the EMU experiment, was quoted at the start of the
year suggesting European policy makers should consider a
coordinated approach to weakening the euro. Juncker's
comments are not that. German (Economics Minister) and an
ECB official (from Austria) contradicted Juncker.
The trend line that we continue to
monitor, drawn off the late July 2012 low near $1.2040 and
mid-Nov lows near $1.2660, comes in now just above $1.30.
The euro rallied a bit more than 3.5 cents off the Jan 10 low
near $1.3040 to $1.3400. It barely retraced 38.2% of the
move at $1.3265 (today's low is ~$1.3256). Near-term offers
may cap bounces toward $1.3320.